Blog Layout

HELOC volume up nearly 50% over first 5 months of 2022 Growing HELOC demand may spark more deals in the nascent HELOC securitization market, one bond-rating agency reports

DDA Mortgage • September 14, 2022


Home-equity lending is on a roll this year, with the combined volume of home-equity lines of credit (HELOCs) and traditional closed-end home equity loans up 47% from January to May of 2022, compared with the same period last year.


Nearly $69 billion in HELOC credit limits and $27 billion in closed-end home-equity loans were originated over the first five months of 2021. That compares with $101 billion in HELOC volume and $38 billion in closed-end home-equity originations over the same period this year, according to a new report by the Urban Institute’s Housing Finance Policy Center.


Closed-end home-equity loans generally carry a fixed interest rate and involve a single lump-sum disbursement at the beginning of the loan, with repayment beginning immediately. HELOCs, by contrast, are revolving debt generally featuring a variable interest rate, like credit cards, and normally do not involve a single lump-sum disbursement. Instead, HELOCs offer two distinct periods during the term of the loan — a 10-year draw period and a 15-year repayment period, for example.


“With the economics of cash-out refinance worsening amidst higher rates, homeowners are showing increased willingness to use home equity lines of credit (HELOC) and home equity loans to tap equity,” the recent Housing Finance Policy Center report states.


The increasing popularity of home-equity loans also is expected to help revitalize interest in aggregating HELOCS for residential mortgage-backed securities (RMBS) offerings, which have been nearly nonexistent since the 2008 global financial crisis, according to a recent HELOC-focused report by bond-rating firm DBRSMorningstar.


“A few HELOC securitizations have been issued recently, after having been non-existent in the post-financial-crisis era…,” the DBRS Morningstar report states. “More potential issuers have looked to add HELOC securitization funding this year, especially given the dramatic rise in home values providing increased home-equity availability. 


“As HELOC originations grow from both bank and nonbank financial lenders, HELOC RMBS may see additional issuer opportunities, and structure formats will likely adapt to the unique features and risk aspects of the HELOC products of today.”


The DBRS Morningstar report also points out that nonbanks have started offering HELOCs that feature “slight variations on the traditional depository HELOC form,” such as shorter terms, fixed rates and an option for a lump-sum disbursement during the draw period. Among the nonbanks that either have or plan to introduce HELOC loan products are Rocket Mortgage, Guaranteed Rate, loanDepot and New Residential Investment Corp. (recently rebranded as Rithm Capital).


DBRS Morningstar’s report also notes that from 2019 to the present, a total of only nine residential mortgage-backed securities (RMBS) offerings have been completed involving HELOCs as collateral.

One of those deals made its way to the market this year. That deal, dubbed GRADE 2022-SEQ2, was a $198.6 million RMBS offering sponsored by Saluda Grade Opportunities Fund LLC. It was backed by 2,327 loans that included a mix of both closed-end second-lien mortgages and HELOCs, according to a presale report by Kroll Bond Rating Agency (KBRA) . 


The loan originator for the RMBS offering was Spring EQ LLC, which focuses on originating second-lien mortgages, including closed-end home equity loans and HELOCs. The initial note purchaser for the RMBS offering, which closed in April of this year, was Raymond James & Associates, according to the KBRA report.


The spike in home-equity lending also was called out by the Federal Reserve Bank of New York, which noted in its second-quarter 2022 Household Debt and Credit Report that limits on HELOCs jumped by $18 billion in the second quarter of this year. The jump represents “the first substantial increase in HELOC limits since 2011,” and is an indicator of an increase in new originations. HELOC balances stood at $319 billion for the second quarter, according to the Federal Reserve report.


“Balances on home-equity lines of credit (HELOCs) increased by $2 billion [in Q2], a modest increase but one that follows many years of declining balances,” the Fed report continued.

Another report by TransUnion shows the number of HELOC originations nationwide, based on the credit bureau’s analysis, jumped from 207,422 for second-quarter 2021 to 291,736 for the second quarter of this year — a 41% increase.


In addition, one of the largest lenders in the country, Bank of America, also reported a big jump in overall home-equity loan originations over the first six months of 2022 — from about $1.7 billion in 2021 to $4.6 billion this year based on the principal amount of the total line of credit, according to the bank’s second-quarter 2022 earnings report. HELOC’s were not broken out separately in that report.


“Cash-out refinance volumes are likely to remain muted for the foreseeable future as most borrowers will be reluctant to give up their ultra-low rates,” the Housing Finance Policy Center report states. “This suggests that demand for HELOCs and home-equity loans will remain strong, especially given the supply shortage and substantial equity build-up for existing homeowners. 



“We would also expect home-equity credit availability to improve as mortgage lenders look for ways to approve more borrowers to keep volumes flowing.”


Have A Question?

Use the form below and we will give your our expert answers!

Reverse Mortgage Ask A Question

Start Your Loan with DDA today
Your local Mortgage Broker

Mortgage Broker Largo
See our Reviews

Looking for more details? Listen to our extended podcast! 

Check out our other helpful videos to learn more about credit and residential mortgages.

Habitat for Humanity sees success with aging in place program

By Didier Malagies • January 22, 2025
A dedicated aging in place (AIP) program offered by the Oswego County Habitat for Humanity (OCHFH) in New York says it is seeing success by incorporating family, community and local resources to ensure older homeowners can remain where they prefer. “It’s been projected that, over the next 20 years, households led by individuals in their 80s will become the fastest growing age group , which provides stability within their communities,” said Samuel Raponi, OCHFH executive director. Through the organization’s AIP program, Habitat collaborates with families, local organizations and other community members in an effort to provide homes that prioritize living for older adults, he said. “This ultimately enhances their quality of life. We employ two different assessments in each case to ensure that the homeowners’ needs are clearly understood,” he added. An initial assessment of the client’s living situation aims to assess each person’s daily living activities, which are scrutinized by a “health or human services professional,” the organization said. This includes how they manage regular tasks like cleaning, shopping, paying bills or interacting with their community. A second evaluation specifically assesses home repair needs, and how to make a dwelling more livable for the needs of an older person. “These assessments enable OCHFH to provide modifications to their homes tailored to each homeowner’s specific lifestyle,” Raponi added. “Among the kinds of modifications we make are installing lever door handles, ramps, railings, grab bars, walk-in showers with a low threshold, and raised toilets to make homes more accessible for older adults.” Other resources, including Meals on Wheels , may be seen as necessary to deploy depending on a person’s circumstances, and all combine into a living situation that is aimed at being more generally beneficial for someone seeking to age in their own home. AIP is actively seeking more collaborative partners in the health care sector, owing to unique challenges visited upon older people who may not be able to adequately address their health needs. “Low-income older adults face a higher risk of chronic diseases and disabilities due to limited access to primary care and a greater likelihood of living in substandard, deteriorating housing,” Raponi added. A recent study from Carewell suggested that many older adults see aging in place as a financial necessity considering the costs of other kinds of living arrangements older people may choose. Nearly half of respondents (47%) characterized aging in place as both a preference and a financial necessity in tandem. 

Is it time to prequalify for a mortgage now

By Didier Malagies • January 20, 2025
1. Assess Your Financial Health Credit Score: Check your credit score (usually 620 or higher is required, though higher scores get better rates). Debt-to-Income Ratio (DTI): Calculate your monthly debt payments compared to your gross monthly income (lenders typically prefer a DTI below 43%). Savings: Ensure you have enough for a down payment (typically 3-20%) and closing costs. 2. Gather Financial Information Lenders will need the following: Proof of income (pay stubs, tax returns, W-2s/1099s). List of assets (savings, investments, retirement accounts). Details of current debts (credit card balances, student loans, etc.). 3. Choose a Lender Research different lenders, including banks, credit unions, and online lenders. Compare prequalification options (many allow online applications). 4. Complete the Prequalification Process Fill out the lender’s prequalification form (online, over the phone, or in person). Provide basic details about your income, debts, and assets. 5. Review Prequalification Results The lender will give you an estimate of the loan amount and potential interest rate. Remember, prequalification is not a guarantee of approval and doesn’t involve a hard credit inquiry. 6. Follow Up with Preapproval If you’re serious about buying, consider getting preapproved, which involves a more in-depth review and is stronger than prequalification. Tips: Use online calculators to estimate affordability before reaching out to lenders. Avoid large purchases or opening new lines of credit during the prequalification and preapproval process. Would you like details on specific lenders or tools to compare mortgage options? tune in and learn at https://www.ddamortgage.com/blog didier malagies nmls#212566 dda mortgage nmls#324329

USA Today: If Social Security falters, reverse mortgages could be worth a look

By Didier Malagies • January 13, 2025
Many retirees have said they rely largely — and sometimes entirely — on Social Security benefits as their primary income stream in retirement . But in instances where these payments may not be enough to make ends meet, other options should be considered — and in the right situation, a reverse mortgage could be one such option.  That’s according to a column published this week by USA Today , which assessed reverse mortgages in tandem with options such as personal savings, a part-time job and other benefits programs. “A reverse mortgage is a possibility for seniors with substantial equity in their homes,” the column stated. “It essentially enables you to borrow against your equity, and you aren’t required to make any payments while you’re still alive as long as you live in the house.” The column is likely referencing the Home Equity Conversion Mortgage ( HECM ) program insured by the Federal Housing Administration (FHA). Loan proceeds are dependent on the amount of equity in the home and current interest rates, the column noted, and there are multiple disbursement options available, the column noted. The minimum age requirement of 62, a core tenet of the HECM program, was also mentioned. “There are closing costs and other fees, and you’ll still be responsible for maintaining the property and paying the property taxes and homeowners insurance,” the column noted. It characterized the loan as a “solid option” for those who have few other assets beyond their homes, adding that “it might not be the right move if you intend to pass the property on to your heirs someday. After you pass away or move out of the home, you or your estate will have to repay the loan. This will reduce how much your heirs receive.” Recent survey data from Clever Real Estate highlighted some realities of relying on Social Security benefits in retirement. Roughly one in five respondents in the 1,000-person survey said they rely exclusively on Social Security benefits as their sole income stream in retirement, with nearly 30% saying they believed they would be able to rely on them. Last year, data from Nationwide suggested that an increasing number of older investors believe that retiring at the age of 65 is no longer a realistic option . This is largely tied to higher levels of stress they’re feeling about the economy and the cost of living.
Show More
Share by: